Everyone makes mistakes in life and business, and I have made plenty over the years. But it's not the mistakes that matter at the end of the day, it's what you learn from them and how you course correct that can make the real difference at the end of the day. Here’s my list of the biggest mistakes I’ve made in Real Estate (which can apply to many other areas of life) and what I’ve learned from them:
1. Recognizing You Can’t Succeed If You Don’t Take Action: I think this is a big struggle for a lot of people and it was for me at first as well. “What if I’m making the biggest mistake of my life (purchasing this house right now)?” This was a question running through my mind as I took the first steps toward purchasing my first home and I know goes through a lot of people's mind as well in their search. I honestly think I had my friend and realtor show me 50 properties before I had the courage to actually buy my first home. But at some point the only way you can achieve your goals is to decide to take some risks and go for it. What I learned was it wasn’t as scary as I first thought, and by taking risks it forced me into action and to learn AS I was growing. I have to fight this urge often because I’m a perfectionist at heart, that I can’t do something unless it’s absolutely right. But if we live by fear and try to eliminate any mistake you’ll never get anything off the ground.
2. Understanding the Business of Real Estate is More about People than Properties: I’m a “Type A” personality and sometimes have a tendency to just charge ahead because I believe in what I’m doing and my capabilities. However, even if you make the best deal possible in real estate or find the perfect home, you’re going to have to deal with people when you buy, sell, or rent ALL along the way. This is especially true if you’re running any type of business around real estate – as you’re in constant communication with realtors, contractors, buyers, sellers, tenants, potential customers, title/escrow officers, attorneys, government agencies, photographers, nosy neighbors, and the list goes on…. Even if you’re just trying to sell your home and want nothing to do with other people, you’re going to have to make an effort to at least work with some people in order to achieve your goals. So, what I’ve learned and I’m still working on is if you want to become truly successfully in the business of real estate you better become an expert at building relationships, problem solving, and working well with others.
3. Realizing You Need to Become an Expert in your Field or it’s Going to be Painful: After I bought my first property (a duplex) that I had lived in for a year sharing living expenses with my brother upstairs and had rented to friends downstairs I finally had to rent to my first “real” renter I didn’t know when my friends moved out. I thought this was so easy and just handed someone keys to my apartment because they seemed nice and had the money to move in without really checking them out at all. I’m sure you can guess the ending, but that was the last money I had every collected from them and I had no idea how to get them out while they were destroying my property. After six months I finally evicted them and then went in with a crew to literally shovel up the disaster they left behind. This was an extremely costly and painful mistake, but one I have never forgotten and have learned so much from such as how the court system works regarding evictions, how to properly screen applicants, and just putting in place processes to make things more consistent and simpler the next time. The same type of example can be used for many other scenarios in real estate, but I’ve learned I have to be ready to continually learn and grow to succeed.
4. Thinking Property Values only go up Over Time or only Follow the Current Trend: I’m sure many people learned this lesson hard in 2008-2009, but if you were in the market before 2008 you know what I mean. This is hard to admit, but I still own property today that is “underwater” in value from buying property at the PEAK of the market in approximately 2006. The good news is the market has come roaring back in the last couple of years and if you invest for “cashflow” without needing to sell you can more than likely ride out market downturns. This still isn’t great that I’ve been in this situation on some properties, but I think going through that crash in values gave me a great perspective to invest today because I’ve seen both sides of the market and also was able to then recognize there was an opportunity when values fell. And going through that experience has made me a much more disciplined and better investor than I was ten years ago because I need to make sure I’m not counting on future market appreciation and hitting solid metrics to make this a good decision to buy today, which has led to some great investments.
5. Understanding that you don’t have to Cross the Finish Line First – you just have to Finish: I’ve been a runner most of my life and have always strived to finish on top with anything I set out to achieve. But with real estate I’ve learned you don’t have to finish first to medal, you just have to finish. Because mortgages are structured with all the rewards on the back end, you just have to stay in the race long enough to win. You may only pay off $1,000 on your mortgage balance the first year, but by year 15 you’re slashing that balance and building huge equity. I loved the game of Monopoly growing up and can think of no better analogy for how real estate works. You start small, acquire property along with way, negotiate and trade up in value, and try to stay in the game long enough to win. That’s real estate – persistence is the key. And when you make a mistake you have to get back up and try again. So, whether you’re just purchasing your own home or buying an investment portfolio always remember real estate is not a sprint, it’s a long marathon. And it’s a journey worthy of finishing no matter how long it takes!